The Presentations summarizes the regulatory framework relating to borrowing by Indian Companies outside India.

1. External Commercial
Borrowing
Borrowing from outside India

3. ECB Includes:
Loan from
Foreign
Securitized Supplier‟s Collaborator/
Bank Loans Buyer‟s credit Foreign
instruments Credit
Equity
Holder
Minimum Average Maturity must be three years

4. Policy
Permitted by the government as a source of finance for
Corporate to expand their existing capacity & for fresh
investment
An annual cap or ceiling on access to ECB
Greater priority for projects in infrastructure, power, oil,
telecom, railways, roads, & bridges, ports, Industrial parks,
urban infrastructure & export sectors

5. Aspects to be focused under ECB
Eligible
Borrowers
End Use not Eligible
permitted lenders
End Use Limits for
permitted raising ECB
Average
All-in Cost
Maturity
ceiling
Period

6. Two ways of raising ECB

8. Eligible Borrowers
Automatic Route
NGOs engaged
in micro finance
Corporate in
Corporate other activities
service sector
than hotel , (Relationship of
viz. Hotel, Units in Special
hospital and at least 3 years
Hospital, and Economic Zone
software up to with scheduled
software up to (SEZ)
USD 750 bank and
USD 200
million granted „fit and
million proper‟ status
AD Bank)
Financial Intermediaries such as Banks, Financial Institutions, Housing Finance Companies,
NBFCs, Trusts, Individuals and Non Profit making organizations are not eligible to raise ECB

9. Recognized Lenders
Suppliers of
Financial equipments
institutions Foreign
such as IFC, collaborators
ADB, CDC etc.
Foreign equity
International
Holders (other
capital markets
than OCBs)
Individuals
International Recognized and Overseas
banks Lenders organizations

10. Limits for raising ECB
Corporate in service sector other than
hotel , hospital and service up to USD 750
million
Corporate in service sector like Hotel,
Hospital, and software up to USD 200
million
NGO engaged in micro finance activity
and Micro Finance Institutions can raise
ECB up to USD 10 million or its
equivalent
ECB up to USD 20 million can have call/
put option

11. Average maturity period
Minimum Average
Limits Maturity period
Up to USD 20 million or its
equivalent 3 years
Above USD 20 million or 5 years
its equivalent

12. All-in- cost ceilings
Average Maturity All-in-cost Ceiling over
Period 6 month LIBOR
3 years and up to 5 350 basis points
years
More than five years 500 basis points

13. End Use Permitted
Import of Capital Goods
Executing new projects
Modernization / Expansion of existing units
In infrastructure sector such as Railways, Roads etc.
Payment of spectrum allocation
Implementation of new projects or modernization /expansion of existing
production units in Real Sector, Industrial sector, Infrastructure sector

14. End Use Permitted
First and second stage acquisition of shares in the disinvestment
process under the Government‟s disinvestment programme of PSU
shares.
Overseas direct investment in Joint Ventures (JV)/ Wholly Owned
Subsidiaries (WOS).
Interest During Construction (IDC) for Indian companies which are
in the infrastructure sector,.
For lending to self-help group or for micro-credit or for bona fide
micro finance activity including capacity building by NGOs engaged
in micro finance activities.

16. Eligible Borrowers
Approval Route
Corporate
Banks and
which have SEZ
ECB with financial
violated the
lending by minimum institutions developers
extant ECB
EXIM Bank average which had for providing
policy and
for specific maturity of 5 participated infrastructur
are under
purposes years by in the textile e facilities
investigation
NBFC or steel sector within SEZ
by the RBI
restructuring
and/or ED

17. Eligible Borrowers
Approval Route
Infrastructur
Corporate in Foreign
e Finance Corporate in
service sector Currency Multi state
Companies service sector
other than Convertible Cooperative
availing like Hotel,
hotel , Bonds societies
ECB for on- Hospital,
hospital and (FCCBs) by engaged in
lending to and software
service above Housing manufacturi
the up to above
USD 750 Finance ng activities
infrastructur 200 million
million Companies
e sector

18. Eligible Borrowers
Approval Route
Special Purpose
Vehicles or any
other entity ECB from ECB from a
notified by the indirect equity group company Case falling
Reserve Bank, holder provided provided both outside the
set up to finance the indirect the borrower and purview of the
infrastructure equity holding by the foreign automatic route
companies/projec the lender in the lender are limits and
ts exclusively, Indian Company subsidiaries of maturity period.
will be treated as is at least 51%. the same parent
financial
institutions.

19. Recognized lenders
Same as in Automatic Route
Foreign equity Holders
Minimum holding required: Paid up equity held directly by
the foreign equity lender is 25% but ECB liability-equity
ratio exceeds 4:1 and up to 7:1

20. All-in- cost ceilings
Average Maturity All-in-cost Ceiling over
Period 6 month LIBOR
3 years and up to 5 350 basis points
years
More than five years 500 basis points

21. End Use Permitted
The first stage acquisition of shares in the disinvestment process and also in the
mandatory second stage offer to the public under the Government‟s disinvestment
programme of PSU shares.
Bridge Finance- Indian Companies which are in the infrastructure sector are
permitted to import capital goods by availing of short term credit(including
buyer‟s /supplier‟s credit) in the nature of „bridge finance‟.
Repayment of Rupee loans availed from domestic banking system
Implementation of new projects or modernization /expansion of existing
production units in Real Sector, Industrial Sector, Infrastructure Sector

22. End Use Permitted
The payment by eligible borrowers in the Telecom sector, for spectrum
allocation may, initially be met out of Rupee resources by the successful
bidders, to be refinanced with a long-term ECB.
Investment for import of capital goods
Overseas direct investment in Joint Ventures (JV)/ Wholly Owned
Subsidiaries (WOS) subject to the existing guidelines on Indian Direct
Investment in JV/ WOS abroad.
Interest During Construction (IDC) for Indian companies which are in the
infrastructure sector, subject to IDC being capitalized and forming part of
the project cost.

23. End Use not Permitted
For on-lending or
investment in capital
market or acquiring a
company (or a part for working capital,
for real estate thereof) in India by a general corporate
sector, corporate purpose and repayment
except Infrastructure of existing Rupee loans.
Finance Companies (IFCs),
banks and financial
institutions eligible

24. Other Important points
Issuance of guarantee, standby letter of credit, letter of undertaking or letter of
comfort by banks/ financial institutions/ NBFCs are not permitted.
Borrowers are permitted to keep ECB proceeds abroad or remit these to India
pending utilization for permissible end uses.
ECB proceeds kept abroad can be invested in deposit/ certificate of deposits/
other products offered by banks, Treasury Bills of 1 year, deposits with overseas
branches of Indian Banks - rated not less than AA(-) by S&P/ Fitch/ Moody

25. Other Important points
Prepayment of ECB up to USD 500 million is allowed by AD Banks without
approval of RBI subject to compliance with minimum average maturity
stipulation.
Existing ECB can be refinanced by raising a fresh ECB - outstanding maturity
of the existing ECB is maintained and fresh ECB is raised at a lower cost.
Borrower to submit an application in form ECB through designated AD bank to
the chief General Manager-in-charge, Foreign Exchange Department, Reserve
Bank of India, Central Office, External Commercial Borrowings Divisions,
Mumbai- 400 001, along with necessary documents.

26. Conversion of ECB into Equity
Government (FIPB) The foreign equity
approval for foreign holding after such
equity participation conversion of debt into
has been obtained by equity is within the
the company sectoral cap
Pricing of shares is as
The activity of the
per the pricing
company is covered
guidelines issued under
under the Automatic
Conversion of FEMA, 1999 in the
Route for Foreign
ECB into equity case of listed/ unlisted
Direct Investment
is permitted companies.
subject to the
following
conditions:

27. Reporting of ECB
Conversion of ECB may be reported to Reserve Bank of India by Filling of Form FC GPR to
the Reserve Bank and Form ECB 2 to DSIM within seven days from the close of month to
which it relates.
Two types of conversation:
Full Conversation of Partial Conversation of
Outstanding ECB into equity Outstanding ECB into equity
Clear indication on the top of Clear indication on the top of
the form ECB 2 of words “ECB the form ECB 2 of words “ECB
wholly converted to equity” partially converted to equity”

28. AD banks desiring to
crystallize their
foreign exchange
liability arising out of
Crystallization guarantees provided
of ECB for ECB raised by
corporate in India into
Rupees, may make an
application to the
RBI.

29. Procedure
Submit Form 83 in duplicate, certified by the Company
Secretary or Chartered Accountant. One copy is
forwarded to AD and other copies to DSIM, RBI.
Obtain Loan request number (LRN)
Draw-down the loan after obtaining LRN
Borrowers are required to submit Form ECB 2 Return
by designated AD to DSIM, RBI on monthly basis.